Cannabis Blog

OAKLAND, CA (CNN) - The IRS is auditing marijuana dispensaries in California, and advocates have called for a change in federal laws.

The sale of medical marijuana is legal under state law, but illegal under federal law, and cannabis collectives say there is a problem because of the way they are being treated by the IRS.

Tax code 280-E does not allow drug trafficking organizations to deduct business expenses.

"If 280-E were applied strictly, we would not be allowed to deduct our rent, our payroll or any of the other normal and usual expenses that other businesses deduct," said Steve DeAngelo, Harborside Health Center.

Attorney Henry Wykowski is representing various dispensaries that are being audited, and he said 280-E was created in the 80s to go after drug lords, and it should be updated.

"What the California dispensaries are engaged in is not trafficking," Wykowski said. "They're engaged in a legal activity that benefits their patients."

Several members of congress have drafted a letter to the IRS, asking it to allow dispensaries to deduct business expenses and not treat the organizations as drug traffickers.

"I hope that what's going on is that the IRS is making a good faith attempt to understand our industry and to tax us like any other businesses would be taxed," DeAngelo said. "And I'm in support of that. We want to pay our fair share of taxes."

DeAngelo welcomed the audit, and he said the audit will help advance the cannabis industry.